Levied with a service charge at an eatery? Here’s what you can do

Eating out in the country just got cheaper — almost by 10 per cent! On 4 July, the Central Consumer Protection Authority (CCPA) barred hote...

Eating out in the country just got cheaper — almost by 10 per cent!

On 4 July, the Central Consumer Protection Authority (CCPA) barred hotels and restaurants from levying service charge automatically or by default in food bills and allowed customers to file complaints in case of violation.

“No hotels or restaurants shall add service charge automatically or by default in the bill,” CCPA Chief Commissioner said in the guideline.

The decision came amid much back and forth between the Consumers Affairs Ministry, who deemed this as ‘illegal’, and the National Restaurant Association of India (NRAI) argued that the tax on the services was fair practice.

Here’s everything you should know about this row and what happens if a restaurant now imposes the service charge on you while you are out.

What’s service charge?

Before we delve into the row between the government and the hoteliers on the matter of service charge, here’s a simple guide to what exactly is service charge.

Normally, levied as a charge of 10 per cent on the food bill, service charge is essentially a tip that is paid for the services rendered.

It is important to note that service charge is different from the service tax that is mentioned in bills and that a service charge is a direct transaction between the customer and the service/wait staff.

It’s similar to paying a delivery fee while using food delivery apps or a convenience fee while purchasing a movie ticket, and is a common practice across sectors.

In the United States, it is customary for patrons to put down at least 15 per cent of their food bill as service charge.

In the United Kingdom too, staff at eateries expect a tip of 10-15 per cent — a practice which is customary across Europe too.

Why the row over it?

The issue came to the fore when customers started complaining about the service charge.

Reacting to the complaints, Consumer Affairs Secretary Rohit Kumar Singh wrote in a letter on 23 May that restaurants and eateries were now collecting service charge by default, and that customers were forced to pay it.

“It has been pointed out in the letter that consumers are forced to pay service charge, often fixed at arbitrarily high rates by restaurants. Consumers are also being falsely misled on the legality of such charges and harassed by restaurants on making a request to remove such charges from the bill amount,” the letter said.

“Since this issue impacts consumers at large on a daily basis and has significant ramification on the rights of consumers, the department construed it necessary to examine it with closer scrutiny and detail,” it added.

At a 2 June meeting, the issue was discussed by representatives of the NRAI, Federation of Hotel & Restaurant Associations of India (FHRAI), and consumer organisations, including Mumbai Grahak Panchayat and Pushpa Girimaji.

The NRAI said that there is no illegality in levying service charge.

It added that information regarding the amount of service charge is mentioned/displayed by restaurants on their menu cards and otherwise also displayed on the premises, so that customers are well aware of this charge before availing the services. “Once the customer is made aware of such a charge in advance and then decides to place the order, it becomes an agreement between the parties, and is not an unfair trade practice. GST is also paid on the said charge to the government,” the industry body added.

What did the government finally rule?

In guidelines released on 4 July, the CCPA stipulated that hotels or restaurant would not add service charge automatically or by default in the food bill.

The guidelines stated that no collection of service charge would be done by any other name and that no hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer’s discretion.

What to do if you are levied with service charge?

There are four options that a customer has if a restaurant/eatery levies a service charge in their bill.

First, s/he can make a request to the hotel or restaurant to remove the service charge from the bill.

If that isn't enough, the customer can lodge a complaint on the National Consumer Helpline (NCH), which works as an alternate dispute redressal mechanism at the pre-litigation level by calling 1915 or through the NCH mobile app.

The consumer may also file a complaint against unfair trade practice with the Consumer Commission. The complaint can also be filed electronically through e-daakhil portal www.e-daakhil.nic.in for its speedy and effective redressal.

Furthermore, the consumer may submit a complaint to the District Collector of the concerned district for investigation and subsequent proceeding by the CCPA. The complaint may also be sent to the CCPA by e-mail at com-ccpa@nic.in.

With inputs from agencies

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